“Loans Have Melted Into A Mess”
Newsday reports from New York. “Sen. Charles Schumer, who heads the Senate banking subcommittee on housing, told an audience in Massapequa yesterday that he and others in Washington are working on legislation to regulate mortgage brokers for the first time and to end loans offer based on false promises.”
“‘It’s despicable what some of these brokers will do,’ Schumer said after recounting a story of an ailing Queens man who refinanced his home on a broker’s promise of a $1,400-a-month payment that changed to $4,000 a month after less than a year.”
“‘There are about eight houses in a two-block area with ‘for sale’ signs on them, and while I don’t know how many of them will end up in foreclosure, that’s the most I’ve seen at this time of year since I’ve lived here. And there was a foreclosure around the corner about two years ago,’ said Tina Diamond, a civic leader and school board member.”
“Schumer said a recent study shows that many single-family homes on Long Island could lose more than $4,000 in value when a house within an eighth of a mile, or one city block, is foreclosed on.”
“‘It’s crystal clear that the scope of the financial damage caused by skyrocketing foreclosures . . . [is] infecting entire neighborhoods on Long Island by depreciating property values,’ Schumer said. He added that as the subprime market explodes, foreclosures will soar, with 8,378 families in Nassau and 10,476 in Suffolk at risk of losing houses by the end of 2008.”
The Boston Herald from Massachusetts. “Home prices are rising in Boston’s fancy neighborhoods but falling in less-wealthy ones - and experts fear the Hub’s recent murder wave might make the disparity worse.”
“Average condo prices plunged 29.3 percent in Roxbury and 7.7 percent in Dorchester. Mattapan’s average house price fell 8.2 percent.”
“Broker John Ford and others attribute some areas’ woes to a number of factors, ranging from a generally soft Massachusetts real estate market to the subprime-mortgage industry’s abrupt collapse.”
“But market watchers say the recent string of murders isn’t helping. ‘Violence is obviously going to affect supply and demand,’ said broker Sam Schneiderman.”
“Dorchester broker Kenneth Osherow said he’s actually seen an increase in would-be buyers recently, although he assumes some house hunters have decided to look elsewhere. ‘After what’s gone on, sure, there will be some trepidation - and rightfully so,’ Osherow said.”
The Times Leader from Pennsylvania. “Across the country, and to a lesser extent in Northeastern Pennsylvania, subprime loans made to millions of risky applicants with poor credit and low incomes have melted into a mess of foreclosures and late payments.”
“George Hanzimanolis, president-elect of the National Association of Mortgage Brokers, said he’s heard stories of people taking adjustable-rate mortgages and getting ‘very comfortable’ with the low introductory rate.”
“They then take on other debt and can’t afford the higher payment ‘when it comes time to adjust.’ While lenders are made to look like the bad guys, ‘Consumers need to take some responsibility,’ said Hanzimanolis, who works in Tannersville.”
“The subprime loan meltdown comes at a time when the nationwide housing bubble has flattened, lowering prices and cluttering the market with unsold homes.”
“Christopher Baduini of Wachovia’s mortgage banking director for Northeastern Pennsylvania, said there is a lot of real estate inventory in the region.”
“Hanzimanolis said the stable growth has not completely insulated the region from the subprime fallout. He said there is a tightening of guidelines by lenders and the elimination of some programs.”
“He said, we’re ’seeing people calling and having to turn people away.’”
“Take a home worth $150,000, for example. In the past the bank would finance it 100 percent, but with the subprime fallout, the financing is cut to 90 percent, leaving the buyer to come up with the remaining 10 percent or $15,000. That puts the purchase out of reach for people who are not able to save enough to pay that share, he said.”
“The problems arose from trying to create more homeowners. ‘We were challenged by the government to put more people in houses,’ said Jim Bulger, president of the Pennsylvania Association of Mortgage Brokers.”
“Don’t expect a quick fix from the government. The market will correct itself, Bulger and others said.”
‘Average condo prices plunged 29.3 percent in Roxbury and 7.7 percent in Dorchester. Mattapan’s average house price fell 8.2 percent.’
‘It’s crystal clear that the scope of the financial damage caused by skyrocketing foreclosures . . . [is] infecting entire neighborhoods on Long Island by depreciating property values,’ Schumer said.’
Interesting that these people can’t connect the outrageous increase in home prices and the resulting decline. Why did condos in crime ridden areas of Boston rise in the first place?
Foreclosures are also a problem. It’s reasonable to retroactively cap refinance penalties. This would help in cases where teaser rates jump up and the borrower has to pay a large refinance penalties. This act would help those who are cash poor, people are after buying a home, but can still afford market rate payments. It would also discourage predatory lending.
The few court cases in which the
greater foolvictim have won against their brokers/banks, they have nominally only won the right to get out of the loan without prepayment penalties, and in some case, accrued interest.Helping those who are cash-poor is not my idea of how to rationalize the housing market. They should be tenants.
And for that matter, why did they ever skyrocket in South Central L.A.?
‘[is] infecting entire neighborhoods on Long Island by depreciating property values,’ Schumer said.’
It is interesting to read Schumer’s comments, it goes to show just how important people “perceive” the value of their property to be. When you have Senators talking about the horrific effects of some falling property values, it makes you realize just how ingrained “housing values always goes up” has become.
Funny they don’t complain when the price of oil and gas falls.
I do… XOM
Formerly “crime-ridden” neighborhoods like the South End and Jamaica Plain gentrified steadily and people who moved in made big profits while seeing quality of life improved. These other neighborhoods were never that bad, have reasonably good transportation downtown, and crime had dropped in Boston in the 1990s. It’s only very recently that the murder rate has skyrocketed. Still low by comparison to other cities, but a sign that something is very wrong, and so the buyers are thinking twice.
Also, most of the condos were conversions of 2-family and 3-family houses, not new construction.
“It’s only very recently that the murder rate has skyrocketed.”
Why do you think that is? This is happening in certain areas of Florida, Orlando being one of them. Our governor (former attorney general) loves to point out that crime overall has dropped in Florida. But this is to some degree BS. There has been a drop in non-violent crimes, like theft, etc. But murders and rapes have gone up. (No I don’t have a link, was on a news program around the time of the elections and people were asking Crist about it and he got his hackles up). But they lump all crimes together and so it comes out that crime is down overall.
Personally I’d rather have my bicycle stolen than be assaulted by a gang or shot in a drive-by.
It’s the echo boom - old people don’t commit crimes, it’s young people. the boomers left, among other things, a wave of violence in their wake. Now, their children are picking up the cause.
WAIT A MINUTE - Dorchester and Roxbury only RECENTLY had crime? I lived in and around Cambridge and Boston from ‘94 to ‘02. I can remember looking at the Dorchester and Roxbury rents and asking some of my co-workers who had lived there or lived there how bad was it REALLY - I count having your home broken into 3 times in one year being really bad…
Yes, there have always been break-ins. The recent panic is over people getting shot much more often.
I lived in the South End (near Roxbury) from 91 through mid-06 and saw the crime rate drop steadily through the 90s and early 00s. The recent wave is a return to the bad-old days. The South End and Roxbury felt a lot safer for a whole decade, but this is a change for the worse. As for why it’s happening, there are a lot of half-baked theories. So far the violence has been almost entirely gang-related with an occasional innocent by-stander caught in the cross-fire.
Granted I haven’t been to Boston in a while but… condos in Roxbury???
I guess the question to ask in these cases is, if the area is gentrifying, where did the people whose propensity it is to solve problems with violence go?
I think in many cases they stayed right there…but were placated/distracted by better economic times. I’m still waiting to see the resurgence of certain crime organizations and other black market activities.
“I’m still waiting to see the resurgence of certain crime organizations and other black market activities.”
Well, then, to paraphrase Red Buttons, “Come on down to Florida!”
The “resurgency” is well under way.
jmunnie, your question “condos in Roxbury?” caused me to put 2+2 together in a way that I hadn’t before. It reminded me of Jack Kemp and that Reagan-era “discovery” that people who own their homes take better care of the neighborhood. Hence (conservative) Kemp wanted to promote home-ownership for low-income people. It was a noble idea … but the outcome is exactly what we are going through now.
Kemp fell to the common logical fallacy that correlation=causality. In this case, it’s not that homeowners tend to take care of their neighborhood. It’s that those who are the personality to take care of things are more likely to have money to own a home.
(they tried the same thing when they encouraged teen parents to get married, thinking it would bring stability.)
Those that are responsible often end up “picking up the check” for those that are not. You “can” grow out of irresponsibility to some degree and we all do it to some extent, but there is a significant portion of the populace that think that irresponsibility is a badge of honor.
Or they play the victim when they get caught in the obvious results of their irresponsible behavior.
“… people that own their homes take better care of the neighborhood.”
That’s probably true. But these people don’t own their own homes; the mortgage holders own them.
Better wording would be: “People who have a lot of their own skin invested in their homes take better care of the neighborhood”.
Here’s just a sample of what you get for a given area and the difference in price… it helps explain why buyers moved farther out into high crime areas (pulled from Realtor.com):
Dorchester Condo - 3 bed, 1.5 bath, 1092 sqft, asking $200,900
Beacon Hill Condo/Townhouse - 3 bed, 3 bath, 3000 sqft, asking $3,295,000
Even with the elevated incomes of Boston, 3.2 Mil is a stretch for most.
Yeah but 3000 sq. ft. in Beacon Hill is an extraordinary comparison? A better comparison would be a 3 bed, 1.5 bath, 1300 sq. ft. condo in the South End. Close to Tremont St. and east enough from Mass. Ave., it would ask $700k-$800k.
“‘It’s crystal clear that the scope of the financial damage caused by skyrocketing foreclosures . . . [is] infecting entire neighborhoods on Long Island by depreciating property values,’ Schumer said.”
How can a property’s value depreciate when it’s a fake value to start with based on absolutely nothing other than speculators buying and selling to each other? Foreclosures are helping to bring prices back down to the real values, which are probably 1/3 or less of what most owner’s imagine or in hock for.
Absolutely. “Depreciation” is exactly what’s needed.
Why did condos in crime ridden areas of Boston rise in the first place?
Broker hype and the NUMERO UNO appraisal criteria, which states race has no bearing on neighhood quality reporting.
Thus…any appraiser cannot accurately report what is transpiring in a neighborhood such as noting the homicide crisis in Dorchester and surrounding environs is escalating and attributable to random gun violence by minority youth.
So the neighborhood gets “rated” as average for the underwriters and everybody goes on their merry way, until the market reacts
with a 29.5% value declines which blows the cover off all the rubber stamp bogus BS.
All and all just more packaged lies and whitewash to sell a POS mortage.
I guess it matters to hd74man whether their loved one is shot by a “majority” or a “minority”. That’s about the only reason one would need to use “race” in an appraisal of the neighborhood–if crime is the concern, crime statistics are needed, not racial demographics. And, of course, hd74man ignores that simply driving through a neighborhood would reveal this “hidden” information about the racial demographics, as would any search on dozens of web-sites. Guess the specuvestors can’t be troubled to do this amount of “homework.”
IAT
I guess it matters to hd74man whether their loved one is shot by a “majority” or a “minority”.
The situation is what it is…minority youth are the shooters
and they are destablizing Dorchester neighborhoods.
But who give a rats azz about the truth-let’s all just whistle past the graveyard.
I find the renter vs. homeowner (or bubble vs. no-bubble) social tension to be similar to the politically-correct vs. speaking-the-obvious chasm.
So all the PC bubble-sitters can know what you sound like when you get on your PC low-horse.
I thought it was different in Lawn Guy Land — or was that Manhattan. Sorry, my NYC geography is a bit weak; I am the exact opposite of all those New Yawkers who can’t find their way around the rest of the country, because their entire universe consists of NYC.
I may not have much new to say on this, but will agree with other commenters that most of the condos are *not* new construction, but renovation of two and three family houses and/or brownstones. These areas have a lot of old houses with “good bones” underneath the years of absentee landlords and neglect. Being located near a subway stop also adds value. Dorchester and Roxbury are the sort of place where one can have a street that’s safe with well-maintained houses, and the next street over is a gang-ridden slum.
I think a lot of people just got priced out of more popular neighborhoods and started looking further afield. As in one post: 200K for a condo in Dorchester versus 700K for an equivalent condo in the rapidly-gentrifying South End. Some people with kids may choose to live in a less expensive/more dangerous area so they can send their kids to private school rather than putting them in Boston Public (which has a few “gems” but is largely beset by the usual big urban school district issues.)
And yes, much of the violence, most of it in fact, is gang-related or at least black-on-black. Occasionally I walk from the Roxbury Crossing subway stop to my work on Huntington Ave. — through Mission Hill which is also gentrifying — and really don’t feel unsafe.
I am sure the subprime implosion is playing a huge role in the declines in prices in those neighborhoods, given that many of the people who’d buy there probably would not qualify for a prime loan.
Mission Hill is a case in point–even in the 1980’s there were still nice, and I mean NICE, houses on the Hill, and well-off people owning them, yet on street level (where the T was frantically trying to cancel streetcar service), little kids were getting killed by stray bullets.
The difference now is that the street level is more attractive than it was … but given that it’s a busy urban area, only somewhat.
Why did condo prices rise in high crime areas?
Because for a brief period of time, crime rates dropped–and dropped dramatically. All through the 1990’s, crime rates dropped steadily in the inner city in Boston, from a high in 1990 to a low around 2002-2003 (I believe). Crime rates have been rising nationally for the last two years.
Second reason: the fair lending laws of the early 1990’s gave people of color access to credit. Banks opened branches in the inner city. Cars filled once desolate streets. There was a push for redevelopment, even gentrification. A new transit line was proposed, with city support. (The MBTA, however, managed to bargain it down to BRT–f***ing jerks.) New stations and station improvements to the commuter rail service through Dorchester are in the pipeline. (This may be, along with other historical reasons, why Dorchester has not fallen as much as Roxbury.)
The farther you come, the farther you fall may be true of Roxbury. Once an Irish Catholic neighborhood, the majority minority community of Roxbury went from crack-ridden hell-hole to engine of activity in a few short years. I wouldn’t say it was exactly pleasant there, but it was a dramatic change. Roxbury seems to be mostly native-born Blacks, whereas Dorchester is a patchwork quilt of immigrant communities from Vietnam, Jamaica, Haiti, El Salvador etc.
You know which neighborhood should go down: HYDE PARK. Sure, the mayor lives there (and built a VERY nice public library by his house). But it SUCKS! It’s ugly, ugly, ugly! Dusty, dirty, dry, disgusting. Ugh! Bulldoze it all and start over.
But market watchers say the recent string of murders isn’t helping. ‘Violence is obviously going to affect supply and demand,’ said broker Sam Schneiderman.”
Well then you’d think the prices would be dropping like rocks in and around “Kill-a-delphia”.
I guess that’s one way to prevent displacement by gentrification. Call it “do it yourself rent control.”
‘Violence is obviously going to affect supply and demand,’ said broker Sam Schneiderman.”
Ladies and gentlemen, your Capt. Obvious award winner for the week!
Yes, but he forgot to use the word “problematic”. “Violence is problematic”. Then he would have sounded wise and sage and everyone can listen and go “Oooh-aahh!”
Definitely…LOL
I can’t believe you said this. From time to time I use the nouveau buzzword “problematic” when I think it will have the desired effect on some $hitheaded yuppie I have to deal with.
Works like a charm.
phillygal, great minds think alike! Nothing like a person from Philly to tell it like it is! Philly folks have built-in BS detectors.
BTW, do you ever get out to Wildwood?
I used to when I was little but since I was a teen it’s been Cape May.
I can’t tell the story about the last time I was in Wildwood because it might be misconstrued as offensive or something. What you say about Phila. people having built-in BS detectors used to be very much the case. But lately things have changed to where the new crop coming up is morphing into a big swamp of stupidity just like everywhere else.
Here’s a no-BS Philly boy (you may have heard of him): Speak English, Baby!
I posted a reply but it’s not showing (maybe because I included a link.)
Anyway if reply doesn’t post, catch me at hbblogger@gmail.com
(I caused a controversy this morning due to an issue that is near and dear to your heart. I believe you knowwhat I’m talkinabout)
“I believe you knowwhat I’m talkinabout)”
Actually, I didn’t see any controversy, at least not here on the blog. Oh, wait, I think I do know what you are talking about, a little domestic matter, right? You may want to consider some new digs.
A few murders does dampen the mood a bit
Unless we turn the good ship USA around, violence is going to affect more and more neighborhoods, places that were once nice middle income areas. I was just reading about how increased gang violence is affecting formerly decent areas of LA. I can’t understand why people would speculate in violent, crime ridden areas, but apparently some were successful doing so.
In Chicago violent crime has been going back up in recent years after steady declines. IMO it has a lot to do with the “gentrification” of many areas.
Yep, those up-to-no-goods and ne’er-do-wells just can’t handle those newcomers. The very idea of them coming in and fixing up the neighborhood!
Full disclosure: I live in an area that is beginning to undergo gentrification.
And let me tell you something: The gentrifiers are NOT the problem around here. We don’t allow our kids to run with gangs, dress like hoodlums, or spray graffiti here, there, and everywhere. Furthermore, we are gainfully employed and we work very hard. We’re not just hangin’ out in the park, dealin’ drugs. It goes without saying that we report crime, we don’t commit it.
> Full disclosure: I live in an area that is beginning to undergo gentrification.
Then you’re viewed as a target - as in “let’s get some of those rich folks money”.
A guy that I was in basic training with, was from Compton. He described the tactics as “just drive until you don’t see any more black people…”. Funnily enough, he was my best friend during basic.
Buying a little Smith & Wesson stock may be a good idea!
Glock, HK better
Also, keep in mind that many of the LA neighborhoods that were built in the late 1940s/1950s are aging out; these houses were *not* designed to last more than 50 years, and it shows.
History of crime under Philadelphia mayors:
Rizzo: fuhgeddaboutit
Wilson Goode: Hey, maybe I should chopper-drop a bomb on a rooftop that will cause an entire neighborhood to burn …LET”S DO IT!!!
Ed Rendell: “America’s Mayor” doesn’t allow crime in his city, so we tweak the stats to make it look like it’s decreasing.
John Street: $hit, no shame in being gangsta…look what it did for me and my blood Milton!… (aside) “Cheezy, how many bills you count in that Hefty bag?”
meant to address this comment, but went off on a tangent.
Well then you’d think the prices would be dropping like rocks in and around “Kill-a-delphia”.
You can pick up a property for dirt cheap in the ‘hoods where most of the shootings are occurring. Unfortunately, the crime wave is hitting the blue collar and less affluent areas the hardest.
I guess that’s one way to prevent displacement by gentrification. Call it “do it yourself rent control.”
Out-of-towners who bought rehabs in marginal neighborhoods are now learning the difficult lesson that the ‘hood tends to reclaim itself.
In the 1970s through the mid-1980s, Philly’s crime rate was below the national average despite poverty and other central city problems. And a larger that average share of its housing stock was one-family homes (rowhouses), the kind that go for megabucks in Brooklyn.
It should have been number one in urban generation. Instead, it went down the tubes.
In the 1970s through the mid-1980s, Philly’s crime rate was below the national average
Yes, the Golden Age of the Big Bambino . The Wiki entry is missing the famous photo of Rizzo with the nightstick protruding from his tuxedo cummerbund. Rizzo also had a “schmooze-ship” with Andrea Mitchell in her pre-Mrs. AG days.
I think a lot of that was crack. And the city never recovered.
My husband and I moved here 2 years ago. We thought of staying but now — greener pastures are calling. Can’t justify all the taxes for the few services we get and oh yea some of the nation’s highest utilities.
Phillygal, you’ve summed up the City of Brotherly Shove quite nicely. (I grew up outside of the city, and made occasional forays into it. It has improved in some ways, but still has a long way to go in others.)
“Take a home worth $150,000…
Love to - where can I find one in my area?
“Take a home worth $150,000, for example. In the past the bank would finance it 100 percent, but with the subprime fallout, the financing is cut to 90 percent, leaving the buyer to come up with the remaining 10 percent or $15,000.”
Even better, take a home “worth” $600,000. Now let’s say that financing is cut to 80%. now the prospective buyer must come up with 20%, or $120,000.
Obviously the bubble is everywhere, but to me there is no question that the bubble markets will get hit much harder in this fallout.
A person who is stuck in a home that’s $5,000 upside down is going to do a lot better than someone in a home that’s $100,000 upside down.
There are still many areas in the country where 100% financing WASN’T required. Those areas likely can hold out their nominal prices until inflation does it’s magic. (continued nominal prices, lower real prices)
unfortunately, those areas of the country that can maintain their nominal prices don’t have a high population!
There are still many areas in the country where 100% financing WASN’T required.
Perhaps not required, but was it taken by people thinking “easy/free money”?
Exactly. In those places the prices may not have gone up much, but the home debtors are still in a tough spot. They’ve been offering 125% refinances in the Denver area since the late 90’s. There are scads of people who have taken the money and totally blown it on stupid stuff like SUVs and vacations. Now they have no home equity, prices are soft and the refi spigot they were counting on is dry.
A recent article about Harley’s debt problems really shows this was a credit bubble, not just a housing bubble. People just plain went nuts, and congress and our “conservative” president egged it along the whole time. Collective insanity is about the only real way to explain it.
“People just plain went nuts, and congress and our “conservative” president egged it along the whole time. Collective insanity is about the only real way to explain it.”
Right ON, climber, testify! That is just the long and the short of it, right there. That’s all anyone really needs to know about the bubble. It is up to those of us who are sane to limit our exposure to insane so-called “friends and neighbors”.
Its been especially bad here since 2000. We took a beating from the last recession and the telecom bubble. It took over 5 years to get back to previous employment levels and the new jobs pay a lot less than the old ones.
The Sun Microsystems campus in Broomfield (N Denver) is a virtual ghost town as wave after wave of layoffs have taken their tolls. Same story with HP and its spin offs. Home appreciation has been non existant since 2001 (how did Utah and New Mexico pull that off?). Colorado has been hurting for a long time, yet the Plasma TV’s have been flying off the shelves at Sam’s Club and Best Buy.
what about the neighbourhood that is the old Stappleton airport? I heard that a lot of expensive housing went in there $500->$900.
Not trying to talk over Colorado’s question, but I have some familiarity with the area you are asking about. I work for an airline and we layover at the Denver Radisson at Stapleton. Just north of the Denver airport is a burial site the Army used to get rid of toxic waste. The neighborhoods around the Stapleton airport are, shall we say, rough around the edges. We had a pilot get shot at while jogging through the neighborhood. He was at an intersection waiting for the light to change when a bicyclist rode by. The rider looked a bit unsavory but the pilot, who is a big guy himself, didn’t think much of it. Then a car comes whipping by and the pilot starts hearing some popping sounds. He looks to see the bicyclist falling to the ground, not fifteen away, with a gun sticking out of the car that just drove by.
Situated across the street from the Stapleton Radisson is a cacophony of retailers, from Best Buy to Sam’s Club to a liquor store. This is on the land just north of the United Airlines training center. Some of the United pilots I’ve spoken to won’t walk across the street to the training center, they will only take a hotel van even though the training center is literally three hundred yards from the hotel.
Just south of the training center is where the houses are going in. That is where the old east-west runways were located and marked the southern end of the airport property. The houses bordering that end are probably from the 1950s and 1960s and the neighborhood is much like the west side I described above. Bad news. I can’t believe anybody would buy a McMansion on what used to be an airport which was surrounded by toxic waste to the north, an industrial park to the east, and rough neighborhoods to the south and west. Why not just take whatever cash is in the bank and go to Vegas?
The old Stapleton land was supposed to be “special” in that its centric (no need to commute many miles from Westminster or Highlands Ranch). But as frcp said the area is hardly attractive.
500-900k? In Stapleton? Heck, tony Boulder doesn’t command those kind of prices:
http://www.realtor.com/Prop/1077177715
“subprime loans made to millions of risky applicants with poor credit and low incomes have melted into a mess of foreclosures and late payments.”
This makes me think of that scene from the Wizard of Oz where Dorothy throws a bucket of water on the Wicked Witch, who then begins to melt. “I’m melting! I’m melting!”.
Yep, the bubble was the Wicked Witch and it is melting from the bucket of cold water thrown on it.
Sure, get your time machine and you might beat us to the 1-bedroom at 57th and 9th we bought for 145K in 2000. Sold it for 350K in ‘04, thinking the bubble had to pop any second! Paid off Catskills bunker, saved a decent chunk for downpayment in sane times, if they ever return, and are renting and waiting in Brooklyn.
Where was Chucky Schumer the last 5 years? Was he not a member of the Senate Banking Committee? Is he not, along with Hillary, one of the smartest people in D.C? Why is he acting now, 5 years AFTER he knew about the increasing use of risky home loans?
And where was Senator Dodd? And where was President Bush? And where was Barbara Boxer, and Ted, and Nancy and Biden, and….
They poured gasoline on the camp fire, now they’re getting out the marshmallows. This is all part of the plan. Create a crisis, then get famous reacting to it.
I seem to recall this as part of the plan on February 27, 1933.
Witty … but you’ve got to watch those Nazi jokes.
Some of us old usenet hands still remember Godwin’s Law.
“Chucky” Schumer and the Senate Banking Committee’s agenda was being set by the majority party– ie your Grand Old Prostitutes.
To be fair, the only person you mentioned who was in a position of any power over the last five years was Bush. The other seven you mentioned are all Democrats, who were unable to do anything until two months ago. All committees were run by Republicans. That said, there is little anyone can do now except run off at the mouth. And actually, having people like Schumer spouting will hopefully accelerate the fall in house prices.
Sure, grab your time machine and you could beat us to the 1-bedroom we bought for 145K at 57th and 9th in 2000. Sold it for 350K in 2004, thinking the bubble had to pop any month (!@%#!), paid off bunker in the Catskills and banked enough for a downpayment in sane times, if they ever return.
LEND up 21%
You think it’s due to them securing a loan from that hedge fund, with the thought being that they may have the liquidity to ride this out? (Unlike New Centruy?)
Maybe they wanted to stick it to the roughly 25,000 put buyers at the 10 strike price?
Wouldn’t surprise me to see LEND close at 10 in next couple of weeks to make the 16,000 calls and 25,000 puts at $10 expire worthless
:)
Of course. When you can’t figure it out, hit up the option tables
Possibly alot of shorts covering.
I really can’t stand how all these people claim they were “duped” regarding the terms of their loan. I mean, they borrow $600,000 and actually think the payment should stay $1400. I mean, give me a break, is there any such thing as financial literacy anymore? Perhaps before someone is treated as an “adult” and competent to make their own financial decisions, perhaps they should have to pass a basic financial literacy test to insure they do not harm themselves or others. Perhaps a financial drivers license of sorts.
I mean, I think most everyone on this board would pass, and imagine if Joe Sixpack actually had to understand the terms, and not whine like some helpless toddler about how they were “tricked”. It is all GREED.
“I mean, they borrow $600,000 and actually think the payment should stay $1400.”
Not to credit any borrower, but being in a buying situation myself in late 2006, the lender had us pre-approved up to $500,000. Let me tell you, I don’t make 6 figures and neither does my wife. There’s no reason these fools should have offered that kind of money to us with only $45,000 to put down. They did though and someone less educated may have bought the “affordability” of that $500K home.
I was in the same situation a few years ago when I applied for a mortgage. I was offered an FHA loan of 182K - assuming 3.5% down. $182K was the maximum FHA limit for my area.
At the time, I made 45K a year. If I had taken that loan, I would have been eating top ramen every night and sitting in the dark. Then the broker indicated that I could qualify for even more money under an 80 / 20 loan and keep the down payment. I thought the lady was nuts.
“If I had taken that loan, I would have been eating top ramen every night and sitting in the dark.”
In a $500K home I wouldn’t have the money to buy Top Ramen on special 10 for $1!!
Also, on caps…I don’t have a problem with caps. No one can tell me that it’s fair to lend in the 12% range on a secured loan…especially when it started at 3.9%. Sorry…have to take the liberal approach on that one.
Do you think it’s fair to borrow in the 12% range?
my sentiments exactly… i was shopping for a loan a few years back, and the lender was willing to ‘lend’ me way more than i needed. it was kinda scary cause i had no idea how i was expected to actually repay that amount if something unfortunate were to happen in the next 30 years… i.e lose of job, disability, medical emergency.. etc..
got cash?
i had a chance to borrow a bunch of money once. you know what?
i didn’t.
man thas was a close call. glad i dodged that bullet.
JTZ,
to the contrary, it is quite unreasonable to retroctively cap refinance penalties, or for that matter to retroactively and unilaterally alter any aspect of a valid contract.
These prepayment penalties cover, among other things, money expended by the ultimate lender to the mortgage orginator (mortgage broker). If some of these brokers were mendacious or worse in explaining the terms to borrowers, then the govm’t should go after them, one by one, every one of them, and make them cough up some cash.
I have lots of sympathy and even empathy for people that got caught up in deals that have now turned out to be bad ideas. But, I have no money for them.
“The problems arose from trying to create more homeowners. ‘We were challenged by the government to put more people in houses,’ said Jim Bulger, president of the Pennsylvania Association of Mortgage Brokers.”
I recall Bush saying a few times that he wanted to create an “ownership society”. Do you guys think that the administration really had much to do with this mess? If so, specifically how? Or is Bulger simply pointing his finger?
$400 million in taxpayer funded downpayment assistance comes to mind.
Is that FHA or something different? FHA has been around awhile, no?
Relative drop in the bucket in the larger scheme of things. I don’t think the flippers and FBs had the lightbulb go off when they’re watching the state of the union and Bush mentions an “ownership society.”
Obviously the real culprits are the Fed lowering the rates and loosening up the money supply combined with the packaging of mortgages to be bought by pensions, 401ks, and hedge funds. #1: money was too cheap and plentiful; and #2: the risk wasn’t properly allocated. The people originating the loans weren’t bearing the risk and it was next to impossible for the people buying MBSs to really know the quality of what they were buying without a lot of work. Classic market breakdown. #1 started the frenzy (people that used to be only able to afford a 250k house in the late 90s could now buy a 375k-400k house in 2001-2002, market prices adjusted quickly so the house formerly 250k was then 400k), #2 lowered the monthly payments to enable flippers and FBs to create illusory prices and drive up prices to unbelievable levels.
Human greed and bad judgment should be a given, but the externalities mentioned above allowed one of these traits to be fed and the other one to be covered up…for awhile.
Can someone explain what an “FB” is. This term is used all over this site, but noone types it out.
f***ed borrower (or, alternately, f***ed buyer)
“…really had much to do with this mess?”
http://www.hud.gov/news/release.cfm?content=pr03-140.cfm
> Do you guys think that the administration really had much to do with this mess?
Definitely. I recall reading a Bush speech from 2004 where he suggests lowering the barrier to homeownership that is the downpayment. GetStucco had a nice link to it. My take on: “ownership” is good, but homedebtorship is not. The government should encourage people taxwise to save and invest but not favor one form of housing (owning) over another (renting).
> Do you guys think that the administration really had much to do with this mess?
Definitely. Bush was all for lowering downpayments - stupid!
Never stand between Schumer and a camera, you’ll get crushed.
For these tools, this is just another opportunity for political grandstanding.
LMAO, UnRealtor. I really despise hacks like Schumer. Long Island deserves to get boned in the housing bust for giving us a hack like this in the first place.
‘We were challenged by the government to put more people in houses,’ said Jim Bulger, president of the Pennsylvania Association of Mortgage Brokers.”
First time I’ve heard anyone explicitly say the government was a driving force like this. I wonder if it was the local, state or federal government, and exactly in what way did the government ‘challenge’ the RE industry?
Challenged is weak, coerced is a better word. Any lender that didn’t lend to unqualified people risked getting sued for discrimination.
There were several government programs that offered downpayment assistance too. This whole fiasco has government meddling all over it, that’s why it’s so hillarious to see Shumer getting all worked up. That guy is one of the biggest meddlers in the country. He specializes in capitalizing on the unintended consequences of his own programs.
This is Bush’s “ownership society” come home to roost.
I still remember my disbelief a few years back at the State of the Union speech, that under his leadership, they had put more people into their own homes than at anytime in the history of the USA.
My jaw dropped. You idiot!
Yes, you managed to get them in, with outrageous prices, but they can’t afford them, unless you steal more of my money to make the payments for them.
I suspect they will. Bring in some more illegals George to fill up all the empty subdivisions. Then we can have a squatters amensty program to go along with the “guest workers”.
BTW, I am a registered republican disgusted with this administration…….It’s not a hate Bush speech.
(rant off).
Diogenes, thank you. I wish more people would speak up. You hit the nail on the head.
You certainly aren’t alone.
You should read “Housing Bubble Engineered” by HappyThoughts.
Do you have a link to that site? Or is it a book? I have never heard of it–sounds interesting.
Ah, you haven’t been listening to the Shrub. It’s called “The Ownership Society”
He should change that to “thought they owned (past tense) sh*t society.” Calling “buyers” owners of places they haven’t invested a cent in is absurd.
The Onion did a piece on that years ago, showing the new “homeowners” blissfully unaware that the bank owned the house. Quite prescient.
Around here we call them home loaners.
Sen. Charles Schumer, who heads the Senate banking subcommittee on housing is finally getting off his butt. He had to know that this behavior was going on for years but now that the wheels are falling off and he is exposed he is going to do something fluffy to make all better. I wonder how much money he has taken in from the housing side of the market for contributions as this behavior was allowed to flourish. Too little, too late again Chuck.
He didn’t notice the S&L disaster until after it happened while on the House banking committee, either.
Yes, why didn’t he complain when flippers and dishonest speculators were bidding the prices up and up and up, sending tax bills into the heavens, and costing people their homes because they couldn’t afford these taxes? The housing bubble was created on purpose, and abetted by local governments and their own politician flippers, so how can he complain now? We’ve all remarked on the absurdity of “luxury” condos and townhouses being thrown up in some of the worst areas imaginable, but none of this could have happened if even the weakest local zoing laws had been enforced. Politicians turned their heads, gave “variances” that were criminal and insane, raked in the bucks, and even bragged about soaring property “values.” EPA reports were ignored or brushed aside to allow building in toxic areas that formerly where shunned. Wildlife habitats were ravaged and destroyed. Places once beautiful were transformed into horrors. It’s all been a monumental, unconscionable scam, and I’m not buying these debt-bed conversions.
Is it any wonder Americans have a NEGATIVE savings rate? The percentages of income they devote to things like mortgage payments, property taxes, and insurance are off the charts. And yet, the MSM always acts incredulous when these stories come out about personal savings rates being negative.
With housing prices as unaffordable as they are, and societal forces at work (the fed, banks, mortgage companies) trying to put people into “the homeownership society”, YES, of course personal savings rates are going to be negative. Their “savings” got put into their house!
“I’m not buying these debt-bed conversions.” Good one!
“Wildlife habitats were ravaged and destroyed. Places once beautiful were transformed into horrors.” Yep. But if you enforce zoning laws to prevent such horrors, you’re accused of elitism. We still have deer and coyotes in my neighborhood, but I can drive to SFO in 15 minutes and downtown SF in 30. No foreclosures, though…
Yes, he’s finally getting off his butt after about three months.
I wonder if Shumer knows that current house prices are based on false demand.
I wonder if Shumer sees the irony given his legislation is based on false promises.
I wonder if Chuck Schumer, along with any U.S. Senator for that matter, could find his way to “work” in the morning without his limo driver.
Shumer isn’t dumb. He could find his way to YOUR work if there were money in it for him. Don’t underestimate these guys. They have a plan, and your well being is not part of it.
No, he’s not dumb, but sheesh, is he ever repulsive! When I watch these political hacks on TV, there seems to be one collective facial expression for the neoliberals and another for the neocons. The neoliberals have this “I smell sh*t”, weeny-whiney, purse-lips fatuous look on their face. Schumer, of course, but also Reid, “El Jefe” Gutierrez of Illinois, Rahm the Impaler, Pelosi, ad nauseum.
Hey, Palmetto, WHAT IS YOUR PROBLEM! This is a real estate blog, not a “swift boating “of our elected leaders. If you have a specific comment about some proposed hosuing legislation, bring it and sling it. Your remarks are not solutions to a very serious housing meltdown.
Davidcee, I don’t know if your post is humorous or serious. I think Palmetto is correct, but I would describe the liberals’ expressions as supercilious and patronizing and the conservatives’ as boring and self-righteous. We are not here to provide solutions to the housing meltdown; there is no solution, and it’s going to happen no matter what anybody says or does. We’re here to make observations. Since elected officials are jumping onto the bandwagon, what’s wrong in pointing out that their wheels are spinning in strange directions?
“Your remarks are not solutions to a very serious housing meltdown.”
Thank you, Mr. Nanny State! Oh, please, plenty of remarks are made on this blog that are not solutions to a very serious housing meltdown. I don’t see you policing them. These politicians are part and parcel of the housing meltdown and deserve every bit of ridicule that David Lereah gets. If you’d rather I gave “equal time” to the neocons, I can do that, too, and I have, frequently.
Since when are “elected leaders” sacred cows, anymore than David Liareah or Gary Watts are? Especially when they encouraged the situation and sat on their hands while it happened. If they’d acted, we wouldn’t be in this mess now. But they don’t represent the people, just the special interests.
Thanks, Incredulous. Actually, your assessment of the demeanors of our “infected leaders” is correct and I should have had the presence of mind to characterize in a much more genteel fashion. But I’m just so darned ticked with all these fools right now.
You said it much better than I did, these pols are jumping on the bandwagon, so why not give them a good pasting just like the nincompoop real estate shills?
That’s for sure. As far as I can tell, they’re all a bunch of crooks. I’m kind of sorry Joe Redner of adult club infamy didn’t win the Tampa City Council runoff, if for no other reason than he tells them they’re a bunch of crooks, and blasts developers. Also, he is the caregiver for a handicapped (”handicapable”) brother, so he can’t be all bad. His opponent, who won, has had the seat for years, and doesn’t even bother to show up much of time.
LOL, Incredulous. I’m not necessarily a Joe Redner fan, but one thing I can say for him, he sure blows the hypocritical local political hacks right out of the water! He exposes their hypocrisy for exactly what it is and I think he makes them angry because he makes them realize they are no better than a strip club owner and they are the real pimps.
No, I expect a delayed, misguided, disguised, half-ass bailout that won’t fix anything, and might very well make things worse by incenting the bad behavior that led to the bubble in the first place.
“Don’t expect a quick fix from the government. The market will correct itself, Bulger and others said.”
Actually, I think we could see interest caps and a stop to all prepayment penalties. A full blown bailout is unlikely. Grace periods before foreclosure and payment adjustments are also likely.
I don’t get angry as much as saddened by the stupidity/and immaturity of the joe sixpack American. We were once a country of great thinkers and do it yourselfers, our leaders understood context and consequence. No they look like a bunch of illiterate whining infants crying to our Gov’t officials to “save us from the bad men” when they got into this themselves. We might as well be French for all the handwringing and complaining.
When my wife and I saw housing starting to skyrocket we didn’t whine to our congressman (Where were they then, as the cost of housing became out of reach to anyone but the stupid/insane?) we hunkered down, saved our money, and endured our friend tsk, tsk’ng us while they judged us for being “just renters”.
The story has a happy ending when we just made an offer on a REO that is 30% below what the same friends paid for their identical house.
Were these great thinkers and do it yourselfers the same ones that wiped out the Buffalo and Passenger Pigeons? Americans have always have a healthy helping of idiots. Its just now our government has extensive tax breaks and other incentives for these idiots…and penalties for prudence.
True, I’m an idealist at heart
The passenger pigeon would have survived if they were more difficult to harvest. Anything edible that can be knocked out of a tree with a stick doesn’t have much of a future around hungry people.
Just look at how the hungry realtors and mortgage brokers were harvesting FB’s over the last few years.
That couldn’t have been much harder than knocking ‘em out of trees with sticks.
Passenger pigeons weren’t the victims of predation so much as loss of habitat. The habitat of the passenger pigeon was American bamboo, and we cut most of it down to grow cotton, corn, “p-nuts”, etc.
It’s just human nature. I had a friend who, after years of raising kids, made the observation ” One boy is pretty smart, two boys are not quite so smart, three boys are stupid, more than three boys and you’ve got trouble”
The buffalo would have lasted a lot longer too if not for their herding instinct. Look at coyotes, we tried to exterminate them too. Big groups are not efficient at much of anything, but call them a market or a legislature and suddenly they’re supposed to be divine.
Never underestimate the stupidity of people in large groups.
In the Marine Corps a detail is always three Marines as it has been shown that two guys will talk each other into almost anything and the third will balance out the decisionmaking.
“Never underestimate the stupidity of people in large groups.”
I would change out the word “stupidity” for “insanity”. It’s more commonly known as the “mob mentality”, which brings about mass insanity. Our Founding Fathers were very aware of the phenomenon, that’s why the US has a Republic, or representative form of government, not a democracy. The representatives are supposed to override the insanity of the mob. However, when the representatives become the mob, then it is a problem, as we are seeing now.
Except for technology, the US is going much the way of Rome in its decline, with politicians pandering to the mob with bread and circuses and Caligula at the helm and hordes of barbarians overrunning the country and the rule of law a joke.
Caligula? More like Constatine.
Yes, maybe he does have a touch of that “living god” attitude (like Emperor Cartagia on Babylon 5), but it’s fairer to compare him to Constantine, the general who was on a mission from God. He combined a disruptive domestic program (to impose Christianity) with disastrous military and defense decisions, leading directly to the weakening of the borders and the eventual collapse of the Empire as a sovereign entity.
And in both cases, the state was already in decline when they got there, economically and otherwise–for example, the wealthy and the middle class avoiding military service–but they made the situation much, much worse, much, much sooner.
Climber: LOL! I resemble your friend’s remark. We stopped after having two sons, because we could see trouble ahead!
Bt: Let us know if you get the house at -30%. That’s wonderful news. I hope the same thing happens everywhere.
“POOR VICTIMS” of the housing bubble,
Alan Greenspan:
“I was forced to lower rates to 1% to moderate the tech bubble recession, and to make the economy look good, so incumbents could get reelected. Those big, mean politicians were really pressuring me! How was I supposed to know it would spawn an even bigger bubble in real estate?? I’m just a powerless (former) central bankster!”
David Lereah:
“I didn’t want to keep fanning the flames with outrageous lies and baseless industry propaganda, but I had to feed my family. The NAR kept on blackmailing me with my enormous salary and benefits. What was I supposed to do –quit and become a regular working-stiff like all you low-rent schmucks out there?”
Gary Watts:
“If I didn’t come right out and say ‘15% was in the bag’ for 2006, they would have hurt my family. I practically choked on those words, but it was either say it or ‘lights out’ for little Billy and Janie. I had to choose between my family or my integrity –what would anyone have done in my situation?”
Casey Serin:
“How could I say ‘no’ to such sweet deals, when everything I learned from those R.K./Robert G. Allen books and seminars was screaming ‘Yes, yes, yes!’ Besides, Galinda was really pressuring me to ‘get a house’. How was I suppoosed to know she meant only one? Besides, all those sellers really tricked me –they used my Macaroni Grill & Jamba Juice addiction to talk me into those illegal cash-back deals. They preyed on my fears of being a Looser and took full advantage of me. I feel so… violated.”
“The subprime loan meltdown comes at a time when the nationwide housing bubble has flattened, lowering prices and cluttering the market with unsold homes.”
This is why the subprime mess won’t be confined to subprime borrowers and lenders. “The experts” are still blathering on about how the contagion won’t spread, but if fewer buyers are able to qualify, and more foreclosed homes hit the market when inventory is already “a problem”, the mess trickles up the chain. And responsible homeowners, who bought before this madness or who bought within their means, are going to get taken down by the marginal buyers who go belly-up.
I’d rather get taken down by the market than screwed by the government. I bought my house in 2000. I’m not worried about the value of my house nearly as much as Shumer and his nightmare in Washington legislative program.
Shumer is the Karl Rove of the Democratic party. He’s a rabid idealogoue who doesn’t care what gets in the way of his plan. Human suffering is merely a tool in the arsenal of change.
Idealogue? Ha! He’s in it for numero uno. Always has been, always will be.
However , I think everyone can agree that some people did believe oral promises by scum loan agents . The industry needs more disclosures in bold black print with perhaps cameras that video the loan signing . Some new laws would take away bogus lawsuit claims .
Also, I would like the lawmakers to make laws that would require repayment of fund gained by foul play in a real estate transaction along with jail time .This cash-back fraud enriched alot of people lately and it would be nice if those people had to pay the debt back instead of just short term jail time . People go to jail for years for robbing a liquor store of 500 bucks yet people took 100’s of thousands of dollars from real estate by cash-back early payment defaults . The day that Casey gets his due for the money that he took will be when justice is handed out .People can’t say that they didn’t know that it was fraud for a buyer to get a huge amount of funds from a kickback from a inflated appraisal .I think that some builders might be getting busted for this practice also .
The sub-prime fraud deals raised neighborhood prices and taxes and this is a issue that the MSM just isn’t talking about .
But Casey is a victim. He was defrauded by lying mortgage brokers.
No one ever goes to jail anymore. Pity.
Suzanne, I think you mean that white collar criminals don’t go to jail. We have so many in prison that we can’t construct them quickly enough! And don’t get me started on prison guards.
climber,
You need to get a career as a defense attorney….
That’s what gets me so hot under the collar about this mess. The jails and prisons are full of people who took something that didn’t belong to them. But the people who stole hundreds of thousands of dollars through fraudulent real estate transactions are on the nightly news crying about how they were victimized.
What are you talking about? The jails and prisons are full of people who bought or sold a product that was exactly as advertised, for a price determined almost perfectly by a free market.
I have noticed the press and our trusty elected officials never talk about the relationship between high prices and foreclosures. Subprime or not, does anyone believe that had loans been firmly grounded to 3X “verifiable” income that first the bubble would never have happened and second, low credit scores or not, we would not be seeing the mess we have today? You cannot loan a person making $30-50K a year $400K and expect repayment. This is not the way to get folks “into homes”. This is insanity.
Incomes of the borrowers weren’t enough to justify their loans, house prices are only secondary. Remember, there are problems in areas with very reasonable house prices. Some places the houses sell for less than replacement cost, like Detroit (far less).
“…does anyone believe that had loans been firmly grounded to 3X “verifiable” income that first the bubble would never have happened and second, low credit scores or not, we would not be seeing the mess we have today?
Amen. I bought in 1996, and not only was it a MAX of 3x verifiable income, but it was also a downpayment, savings in the bank, no credit card debt and proof of steady employment. And purchasing at 3x income is not a cakewalk. I cannot even imagine these yo yo’s at 7x+ annual income. As these loans continue to reset, there is no way people will make those payments over the long haul.
Exactly GH.
People that believe that sub-prime lenders should be able to do what they want in a free market system and they will self correct are not thinking about the “property tax factor “, involved with real estate .
Solid property appraisal and arms length transactions determine RE market values which in turn determine property taxes . If you have markets that were based on fraud deals /unqualified buyers and inflated appraisals in which the buyers were really “not able ” to pay ,you have a false market that property taxes /insurance rates were based on .There are people who have been forced out of their homes by property/insurance rates that skyrocketed that were based on sub-prime speculation /unqualified buyer /fraud demand/transactions .
This sub-prime mess brings up alot of issues that lawyers could have a field day with .
In the height of the housing boom you had sub-prime lenders approving 40% /50%/60% increases in RE appraisal values in one year based on the unqualified /speculators/flippers getting 100% financing .
The guy who said in essense that a foreclosure reduces property values by 4k is dreaming . Foreclosures can destroy neighborhood value by 50% or more as well as back off lenders from lending in the area .
When a person buys into a neighborhood ,they should have the assurance that the property values were based on proper appraisals /lending . To bad the industry departed from the old lending standards with the BS of getting people into homes .
“The guy who said in essense that a foreclosure reduces property values by 4k is dreaming . Foreclosures can destroy neighborhood value by 50% or more as well as back off lenders from lending in the area .”
I think he’s saying each forclosure. If you only have 1, then 4K is no big deal, but how about 10-20 foreclosures in the neighborhood? Pretty soon we’re talking real money.
Foreclosures don’t cause declining property values. It’s the declining property values that cause the foreclosures. If the market price were increasing, FB’s could just sell or refinance.
Foreclosed properties are sold at true market prices, not wishing prices, and so get fingered for causing price decreases. In fact it’s the whole market which is responsible for price decreases.
OT, from the WSJ:
“Politics & Economics: China Plans a U.S. Spending Spree” (page A8)
“China is drafting plans to purchase $12.5 billion of U.S. goods ahead of a visit by top officials to Washington next month, a person familiar with the plan said, a signal that business between the countries is continuing despite trade tensions.
“This year’s spending spree is tied to the next round of the so- called Strategic Economic Dialogue between the U.S. and China, a series of high-level talks led by Vice Premier Wu Yi and Treasury Secretary Henry Paulson. After hosting Mr. Paulson and other American cabinet members in Beijing in December, Ms. Wu is to lead a large Chinese delegation to Washington for the next meeting, scheduled for May 23-24.” [...]
“The current plan calls for China to purchase $10 billion of machinery and electronics, $2 billion of soybeans and $500 million of cotton from U.S. companies, the person familiar with it said yesterday. Beijing is working with Chinese companies and industry associations on the plan, this person added.” [...]
“Some analysts have played down the broader consequences of the trade dispute. “I don’t think this will lead to a trade war,” said Ha Jiming, chief economist at China International Capital Corp. in Beijing. China’s displeasure may be less severe than it seems, as the government was already moving to phase out some of the policies the U.S. has challenged. “Pressure is not necessarily bad if the pressure coincides with China’s interests,” he said.”
Guess you gotta spend those dollars somewhere?
Note that the lions share are being spent on depreciable assets, as opposed to consumer goods.
Yes, whereas we don’t need to produce nearly as much as we consume–we just make up the difference by printing more $. It’s amazing how long the rest of the world has gone along with this…
That is the real bubble.
I think it’s fascinating that they’re buying raw materials and selling us finished products. Wasn’t that the role of the colony in the (theoretical) British Imperial system? You know, the one we fought a war to get out of?
This is getting interesting.
“They then take on other debt and can’t afford the higher payment ‘when it comes time to adjust.’ While lenders are made to look like the bad guys, ‘Consumers need to take some responsibility,’ said Hanzimanolis, who works in Tannersville.”
Consumers will always overextend themselves financially WHENEVER GIVEN THE CHANCE, so lenders ARE indeed to blame.
If I walk into Tiffany’s and try to buy a $500.000 locket, they won’t give it to me unless I can guarantee payment. After all, they’re running a business and not a charity. When some stupid schmuck who makes $50K a year wants to buy a $700K home and walks into a lenders office he should be LAUGHED OUT instead of approved.
LENDERS AND EASY CREDIT CREATED THIS MONSTER, so F@CK YOU Mr. Hanzimanolis.
Consumers will always overextend themselves financially WHENEVER GIVEN THE CHANCE, so lenders ARE indeed to blame.
A little factoid that has not escaped the attention of your friendly neighborhood Lender/Mortgage Broker/Shark.
That’s why whenever I pay off my cc balance I get a book of blank checks from them within a couple of weeks.
I agree that consumers will take on more debt than they can afford . It’s just the nature of the human beast that people can’t say no ,so that is why lenders use to determine what borrowers could pay/afford. During the RE boom/mania the borrowers were offered a easy way of paying for their debt and that was the “myth of ongoing appreciation “.Borrowers were stupid to believe that they could just finance their life style by just refinancing every one to two years .
Apparently during the last 5 year real estate cycle the public/borrowers had to be the check and balance on the lenders and realtors rather than the other way around . Why the borrowers did not back off in 2002 when the market started to contract because of affordability is the question .Instead a mania with myths took hold with the lenders supporting every year of the increase in prices ,absent true affordability by fake liar loans . I have never seen anything like the increases in price that took place in real estate in recent years .
“I have never seen anything like the increases in price that took place in real estate in recent years .”
I don’t think anyone has. When my wife and I bowed-out of the buyers market, we were amazed at the continued frenzied buying going-on all around us. We just couldn’t figure out how it was that minimum-wage workers were still purchasing while we -with a combined yearly of $90K- simply couldn’t afford it anymore.
Now we know. These FB’s were getting free money thrown at them, with no accountability whatsoever!. It was all part of a scheme that sought to keep the game going so that agents, lenders and brokers could continue to cash their commissions AND DAMN THE CONSEQUENCES.
Well.. DAMN THE CONSEQUENCES NOW TOO.
Got Foreclosure?.
GOOD!.
You can get them to stop that, but you have to inform them–they make it arduous. Probably at some point congress passed some law saying they have to stop if you ask. They should pass a law so that they ONLY send credit checks when requested. They should also bad those “offers” on the mail-in envelope as fraud. They are pretty much fraudulent, saying one thing but taking it back in the fine, and I mean fine, itty-bitty, granny needs a magnifying glass print.
BoA won’t go down, but I would be cheering all the way if it did. Hmm, what if they lend billions of dollars to hedgies tomorrow? Yes, precious, yes, yeeeessss.
I’m going through the NAR Pending Existing Home tables… a couple of observations:
1. While the month over month sales are up modestly in Feb v. Jan. the MoM changes have been really volatile. For example, December 2006 was up 4.5% MoM…that sure was a head fake.
2. On a year over year basis (less noisy than MoM, I think), the pace of sales declines is accelerating again after “dancing along the bottom” in Dec 06 at -6.3% YoY. Feb 07: -8.7% yoy and Jan 07; -8.2%.
3. Someone else noted on a previous thread that the Feb data for pending closings risk revision due to financing falling through. I agree with that; while cracks were forming in subprime back in February, it really fell apart in March.
On point #3 when I say “risks revision” I mean is that a lot of those pending sales won’t square with closings in the future if pending sales fall through die to lack of financing.
Keep a close eye on revisions. I’d recommend holding onto each months’ reports to see which direction the revisions go. The NAR is not a neutral third party, they have a big stake in all of this and a very strong bias. Interesting that the Fed numbers have consistently shown a steady downtrend, while the NAR numbers have been full of upside “surprises” which are then quietly revised down in the next months’ numbers.
Anyone know if the numbers are corrected for the number of days in the month? With January at 31 and February at 28 a flat number is really a 10% increase… which is the only thing that could remotely justify the pop in HB stocks we see today…
Anyone know if this is the case?
monthly numbers are seasonally adjusted…
Then they are truly full of crap for paying this any heed.
Any comments on when the stock market will fall relative to the housing crash? It amazes me how traders have such a short attention span - the market reacts to daily events rather than the big picture.
CRACK!…
…
…
TIIIIIMMMMMBBBBBEEEEERRRRR!!!!!!!!
Real Estate and Mortgage Lobbysits make huge donations to Govt interest groups. Now that the shit is hitting the proverbial fan, not only will the politicians take the money, but know they will raise their political careers to new heights by fighting “evil” the evil mortgage industry.
The governement has known and has contributed to the loose lending practices. This is nothing new. It was nothing new when the government ignored a stock market bubble that caused millions of Americans trillions of dollars in lost equity.
As I mentioned before, this is the post-bubble clean up. Members of our Government act surprised…go on a witch hunt… and then claim all is good in the world after years of litigation.
I can tell you that this is long overdue. The amount of FRAUD in the mortgage industry is mind boggling. It runs deeper than most people know or care to admit. Lenders have been given very loose guidelines and the Government cannot police them all. If a stockbroker is required to have licenses and continuing education then so should mortgage brokers and bankers.
The amount of Felons in the mortgage industry is scary. Plus they have access to people’s personal information. This has turned from a reputable industry into an industry plagued by Scumbags.
Anyone who pays points on a mortgage is a class A idiot. Inbetween junk fees from title companies, front and back points from lenders the cost of the average refinance is much more than it should be. The industry has been trying to move towards a technical standard but quite frankly I do not think they want to automate this industry so they can keep charging B.S. fees.
Greed for lack of a better word is good said Gordo Gecco…and look where it landed him. Everyone loves an industry that makes money..but once it starts loosing money the lawyers come out of the wood work. Same with the dot com bubble. Riddle me this…where is the next bubble?
“The amount of FRAUD in the mortgage industry is mind boggling. It runs deeper than most people know or care to admit. Lenders have been given very loose guidelines and the Government cannot police them all.”
LMAO! In reading your great rant, it occurred to me how similar this is to the illegal immigration problem. Govmint looks the other way and even encourages the problem, even penalizing people who try to do something about it and then when it gets massive, the trend is to claim that nothing can be done about it. So it should be rewarded and legalized.
Maybe there will be a mortgage amnesty. Maybe all the FBs ought to have demonstrations and protests coast to coast. “Owning a home is not a crime!” “I wuz a victim!”
No bubble here. Everyone go back to what you were doing. Move along now…
“Housing is groping for a bottom here,” Eric Green, said chief market economist at Countrywide Securities in Calabasas, California. “Consumers are feeling better about getting into the market.”
e gain in February “is encouraging,” said David Lereah, the real-estate agents group’s chief economist in a statement. “The data suggests an underlying stabilization is taking place in the housing market, but it will take another month or two to clarify.”
http://www.bloomberg.com/apps/news?pid=20601170&sid=a92Hv.ybHGE4&refer=home
“Housing is groping for a bottom here,’’
That’s hot.
LOL!
Just like Wile E. Coyote. Actually, we’ve gotten to the look at the camera and blink twice point. We’re just about to the feet fall and he stretchees out while his head is still looking at the camera moment. That represents when the subprime implosion crashes the lower end of the market. It’ll be a year before we get to the wave goodbye to the camera and the head dissappears from view. Then comes the longshot of his body falling away into the distance followed by poof.
April 3 (Bloomberg) — More Americans signed contracts to buy previously owned homes in February, easing concern the real- estate market will get even worse. The National Association of Realtors’ index of signed purchase agreements rose 0.7 percent after dropping 4.2 percent in January. Economists had forecast a decline. The index was down 8.5 percent from a year earlier…..
…..
…….sales of previously sold properties, they said. Those sales unexpectedly surged in February by the most in three years, the Realtors’ group reported last month.
What a surge! 0.7%! Wow!
What’s next? Day to day comparisons? Then they can report the changes every 3 days or whenever the number goes up.
Came across this as a possible short idea. Have not analysed it yet
http://www.thestreet.com/pf/newsanalysis/businessnews/10348175.html
“Take a home worth $150,000, for example. In the past the bank would finance it 100 percent, but with the subprime fallout, the financing is cut to 90 percent, leaving the buyer to come up with the remaining 10 percent or $15,000. That puts the purchase out of reach for people who are not able to save enough to pay that share, he said. “
~~~~~~~~~~~~~~~~~~
I grew up in this area (Clarks Summit, PA) and 150 thousand can buy you a pretty nice house.
I can only wonder about the many stories I’ve heard. One was down the road from where my aunt lived in Dallas, PA – a nicer area where 500 thou will buy you a castle…
Wife: Physical Therapist, Husband: Paramedic. Together they might be breaking six figures. Bought a $500,000 home . They figured they would “grow into it.”
I wonder what type of loan they got on this and if they’re delinquent yet. Or in foreclosure. I would bet things aren’t pretty right now in their home. And anyone knows the cost of all the furnishings for these homes. I can only imagine their Home Depot credit card, not to mention the others.
Question -
Is the $500k house new construction? If it is, do they rack you in NE PA on property taxes as they do in SE PA (if newly built)
If not, how are property taxes up there overall?
Yeah, the house was new construction.
Dallas and Clarks Summit are two of the nicest areas (imo) in the Scranton/Wilkes-Barre area. The property taxes are quite high, as the school districts are very good. I don’t know for certain, as I never owned there (my folks did for ~20 years). I lived there from 2nd grade through undergrad (at the Univ Scranton). My folks were always complaining about taxes, but they complained about alot of other things as well.
My father’s side of the family was from Scranton, I used to travel there a lot as a kid, my aunt lived on Electric Street, which I think is near Dunmore.
Does Clark’s Summit still have that mountain of culm that continually burns?
I think a large part of the issue with Joe and Jane Sixpack is that homebuying is a heavily emotional affair for many Americans. In other words, people often don’t buy homes based on rational thought, but on “keeping up with the Jones,” “becoming a grownup,” or other such silly notions. Such people can be talked into just about anything. I think it’s true that too many people will put more thought and study into buying a bigscreen TV than they do the biggest purchase of their lives.
Traditionally, lenders acted as the voice of reason since it was their money on the line. But the rise of the MBS suddenly meant that they got to play with other peoples’ money and still draw a commission. Craziness ensued.
Newsday reports from New York. “Sen. Charles Schumer, who heads the Senate banking subcommittee on housing, told an audience in Massapequa yesterday that he and others in Washington are working on legislation to regulate mortgage brokers for the first time and to end loans offer based on false promises.”
“‘It’s despicable what some of these brokers will do,’ Schumer said after recounting a story of an ailing Queens man who refinanced his home on a broker’s promise of a $1,400-a-month payment that changed to $4,000 a month after less than a year.”
Schumer is going to pander to the poor vote and the stupid vote. Just like he did with gun control and most of his other campains.
I hate him.
I am sure he will come up with a plan that involves my checking account.
“…regulate mortgage brokers for the first time and to end loans offer based on false promises.”
It sounds like he is cooking up a plan to crash the market. Without loans based on false promises, what else will support unaffordable bubble prices?
GetStucco,
Exactly. False promises like…you really can afford that $600K POS. This really is a smart move. RE always goes up. You can always refinance in a year or two. You can always sell and be richer for it. You can liberate your home’s equity.
Creative donwpayment funding idea (why do I smell a scam?)…
——————————————————————————
Home buyer’s club
New down-payment funding idea draws regulators’ attention
By Gail Liberman and Alan Lavine
Last Update: 7:06 PM ET Apr 2, 2007
PALM BEACH GARDENS, Fla. (MarketWatch) — The pressure is on to close home sales, but some tactics are raising eyebrows of financial regulators and industry observers.
Take one recent home sale that nearly derailed when the potential buyer discovered a lien barred access of funds for the mortgage down payment. The sale did successfully close thanks to a program, known as “DpFunder.”
http://www.marketwatch.com/news/story/new-down-payment-funding-idea-draws/story.aspx?guid=%7BAA2879A8%2D4495%2D4C1D%2DA8CC%2DE679599DD3DB%7D
GetStucco: This sounds like a pyramid scheme, unless the “membership” fee is higher than the “commission.” Either way, I’m glad that the regulators are onto it.
What about the other Great American Dream: to own a car the size of a whale. Government should subsidize car-loans so nobody is excluded from buying a Mercedes S-class or a Cadillac. And bail them out if they fail.
Oh, and flat screen TVs….and RVs. This is a human rights issue.
They did subsidize purchase of large cars, such as the Hummer, for self-employed, ie doctors, plumbers, certified financial planners, realtwhores, etc.
House prices need to fall alot to bring back affordability.
However buying at these still stupid prices deserves the @$$ pounding down the road when u lose money.
House prices need to fall alot to bring back affordability.
However buying at these still stupid prices deserves the @$$ pounding down the road when u lose money.
http://tinyurl.com/ys5396
“Mortgage crisis calls American Dream into question”
Despite the crisis, Massachusetts Democratic Rep. Barney Frank, who heads the House Financial Services Committee that likely will set new lending rules, is one of the few politicians willing to admit that homeownership is not for everyone.
“Not everyone is ready ever. A lot are not economically ready now,” Frank said in an interview with Reuters.
“This administration is acting as if the only important program to help people with housing issues is to get them into homeownership. I think that overemphasis has contributed to the subprime crisis. People were put into homeownership who just economically should not have been there.”
….
“Should we really interfere in a contract between two mature adults over something that involves no deceit?” asked Ron Utt, a research fellow at the right-leaning Heritage Foundation think-tank in Washington.”
(WTF? Is the Heritage Foundation promoting gay marriage here?)
“Everyone wants immediate gratification. All they think is ‘I want this house now,’” said Joann Brady, director of the nonprofit Home Ownership Center of Greater Cincinnati. “The lender was looking only at the bottom line. The client was not reading the documents. It’s both of their fault.”
In any case, John Taylor, president of the National Community Reinvestment Coalition, said politicians should not pretend that growth in minority homeownership is anything more than a fleeting increase.
“We shouldn’t make believe we’re helping people into homeownership by giving them a predatory product that creates a temporary homeownership,” he said. “Two years down the road they are on the street and … in a much worse position.
“Is it paternalistic? Call it what you want. I don’t care, I’m not running for office. I just want to keep people in homes they can really afford.”
(”temporary homeownership” that’s going to be my favorite expression for today)
‘“Should we really interfere in a contract between two mature adults over something that involves no deceit?” asked Ron Utt, a research fellow at the right-leaning Heritage Foundation think-tank in Washington.’
“(WTF? Is the Heritage Foundation promoting gay marriage here?)”
Clever comment, OB_Tom. This is the same Heritage Foundation that rails against homosexual EVERYTHING between mature adults, whether deceit is involved or not.
I was wondering if someone in the trenches can answer this for me. I have a friend who is trying to buy a house (I know, I know, I tried), but he has a FICO of about 650, probably 3% down, and the broker, employed by Countrywide, who originally stated that he would make the loan has been very “difficult” to get a hold of since making that statement. Is he trying to find someone to buy the loan? I have been wondering if it is just taking that long, and if, after 1 week, the environment has changed so quickly, that it is unlikely to be done?
Any thoughts out there?
Just a guess on my part: mortgage products are changing on a weekly basis. So it could be that the broker “thought” she could get them into that loan product, but now the home office has taken that product off-line, so she’s got to find something else that will work for them (and maybe she can’t find anything).
I don’t work in the industry, so that’s just an educated guess on my part…